Our investment philosophy
We have a distinctive approach focused on producing consistently positive returns in all market conditions. Ours is an advisory rather than a discretionary service, which means that clients retain the final say over whether an investment should be bought or sold. We try to combine good investment returns with first class administration and clear reporting.
We operate without the constraints – and excuses – that come with trying to match or mimic the performance of market benchmarks. Instead, we try to protect and grow the real wealth of our clients over the long term, whilst shielding them from the panic and stress that comes with stock market crashes.
We select expert and experienced fund managers to undertake asset allocation for us in their funds. Experience has shown this is the most efficient way to achieve the best, risk adjusted returns over a long period.
We do nothing well
John McEnroe once said that he was such a good tennis player that the only person who could defeat him was himself, i.e. that he could only be beaten by his own temperament. Similarly the greatest threat clients of large financial organisations face to their investment performance is from the in-house sales culture. Advisers working in big firms are often paid largely or solely on their new business sales, which often results in classic mistakes such as buying at the top of the market and selling at the bottom.
Doing nothing takes iron discipline when faced with the fears and temptations of the markets. At Scholes & Brown we have never had sales targets and we do nothing extremely well. Once we find a great fund, we try to stick with it. Investment activity in the form of buying and selling funds or shares involves costs. The more we can minimise these costs, the better.
What we look for in an investment
In our opinion, a low risk investment with a 10% return in a year is always a good investment, even at times when the markets are rising faster than that. We never attempt market timing. Getting market timing right is a skill we do not claim to possess. Looking at their results, neither do many other advisers, but that doesn’t seem to stop them trying. Warren Buffett, the greatest living investor, once said: “Failing conventionally is the route to go; as a group, lemmings may have a rotten image, but no individual lemming has ever received bad press.”
We are not fixated on benchmarks. Over a sufficient period of time, you will no doubt want to assess our performance against a range of benchmarks – the performance of cash, bonds, equities and other funds and we will assist you in that process by providing comparisons. We do not try to maximise short term performance. In our view, even a year is a short period to measure things by. Moreover, a year does not have its foundations in the business or investment cycle. It is, in fact, merely the time it takes the earth to go around the sun and is therefore of more use in studying astronomy than investment.
You should only invest in funds with money that will not be needed for a long period of time and only if you are capable of remaining relatively sanguine about market adjustments. Falls in market prices may make the market value of your portfolio go down, but we will only be concerned if we believe that the intrinsic value of the portfolio has declined and we will tell you so. Conversely, we will not be rejoicing when we get a short term performance boost from a lucky event or fortunate date of investment.
We only invest our clients’ hard earned money in funds we would own ourselves if we were in the same position. Indeed, many of the funds held by clients are also owned by the Directors.
It is a statutory requirement that we must point out that past performance is not a reliable guide to future returns. The value of funds and the income from them can go down as well as up. You may get back less than you originally invested on encashment. You should always regard your investments as being for the long term, at least five years and ideally longer.